In an encoding method which utilizes plural codebooks, certain bits of a user data input sequence are considered as branch selection bit(s) which determine (1) how the remainder of the input sequence is to be divided into plural subsequences and (2) which codebooks are addressed using the plural subsequences in order to generate corresponding plural output sequences. The plural output sequences are then concatentated together to form a codeword. The method reduces the size of the codebooks that otherwise would be employed for the particular code involved in the encoding method. The encoding of the present invention is particularly suitable for a Quadbit Modulo 2 (QM2) code.